Capital City Insurance v. Quinn

73 Ala. 558 | Ala. | 1883

BRICK RLL, C. J.

— In the absence of acceptance, the bill of exchange, having been drawn by one partner, payable to the partnership, would have been incomplete, legally speaking not a bill of exchange, until it was indorsed by the payees, entitling the indorsee to sue the drawer and all other antecedent parties. Murdock v. Caruthers, 21 Ala. 785. The acceptance of the bill, which seems to have been contemporaneous with its drawing, and is founded on a consideration of value — the pre-existing debt of the acceptors to the payees — imports an engagement upon the part of the acceptors to pay the bill to the payees, or the rightful holder thereof, when, according to its terms, it became due and payable. The acceptors became the primary, principal debtors, and their obligation was similar to that of the maker of a promissory note. — Story on Bills, § 252; 1 Daniel, Neg. Ins. §§ 532-37. Upon a failure to pay at maturity, there was no legal impediment to an action at law by the payees (if they had remained the holders) against the acceptors. The acceptance was, of itself, an admission by the acceptors of every thing essential to the existence of their liability as primary, principal debtors; of the right of the drawer to draw, and of the capacity of the payees to take and hold,' or to indorse the bill.

A negotiation, or a transfer of a negotiable instrument, bona fide, before its maturity, in the usual course of business, for a valuable consideration, and without notice, is by the law merchant esteemed as a creation in the indorsee of an original and paramount right of action against the previous parties; and in his hands the instrument is discharged of all legal and equitable defenses to which it may have been subject before it came to him. — 1 Amer. Lead. Cases, 420; Pond v. Lockwood, 8 Ala. 669; Winston v. Westfeldt, Ala. 760. An exception to this general rule, obtaining in this State, is, that a holder, acquiring a negotiable instrument upon a usurious consideration, is not a bona fide holder; and, in his hands, the instrument is subject to equities or defenses which would have been available against the antecedent parties. — Saltmarsh v. Tuthill, 13 Ala. 390; Saltmarsh v. P. & M. Bank, 14 Ala. 668; Carlisle v. Hill, 16 Ala. 398.

The first inquiry arising upon the instruction given by the court below (and that instruction is the only matter now assigned as error) is, whether the contract by which the plaintiff acquired the bill from the payees, is usurious. It is not insisted that the original contract, that by which the acceptors became bound to pay the bill to the payees according to its tenor, was infected with usury. That contract was fair in all its parts; there was no loan of money, or forbearance of a debt, for which any greater rate of interest was promised or exacted than 'that which the law authorizes. “A note or bill, which in the hands of the holder is a valid debt, may be bought or sold as any other chattel at its real or supposed value, and the transfer of such a note or bill at a discount beyond the legal rate of interest' is not usurious, although the holder may indorse it, tmless the transaction was'a mere device to evade the statute against usury.” Saltmarsh v. P. & M. Bank, 17 Ala. 768. This principle may be regarded as settled; though decisions to the contrary may be found, as it is supported by the great weight of authorities, which are too numerous for special citation. In Munn v. Commission Co., 15 Johns. 44, Spencer, J., said: “The principle is too well settled to be questioned, that a bill, free from usury in its concoction, may be sold at a discount, by allowing the purchaser to pay less for it, than it would amount to at the legal rate of interest, for the time the bill has to run. The reason is obvious; as the bill was free from usury, between the immediate parties to it,-no after transaction- with another person can, as respects those parties, invalidate it. And I take it to be equally clear, that if a bill, or note be made for the purpose of raising money upon it, and it is discounted at a higher premium than the legal rate of interest, and where none of the parties whose names are on it, can, as between themselves, maintain a suit on the bill when it becomes mature, provided if had not been discounted, then such discounting of the bill would be usurious, and the bill would be void.” This bill was not drawn or accepted for the purpose of raising money, and as we have said, after acceptance, was a valid debt, an available security in the hands of the payees, upon which, in their own names, if they had remained the holders, and there was default in payment,' they could have maintained an action against the acceptors. The right to sell the bill, at such a discount from the sum expressed upon its face as they chose 'to accept, was'as absolute and unqualified as their right to sell any other chattel which they may have owned. A sale at any rate of discount, unless the transaction originated in a treaty for the loan of money, of which the sale or discount was the consummation,- is not a loan of money, or the forbearance of a debt, and is not consequently offensive to the statute against usury. Whether the transaction, if it had originated in a treaty for the loan of money, consummated by a discount of paper at a rate exceeding legal interest, would fail within the statute, is not a question in the case, upon which we intend intimating an opinion. The plain distinction between the present case and the cases of Saltmarsh v. Tuthill, 13 Ala. 390, and Carlisle v. Hill, 16 Ala. 398, to which we are referred by the counsel for the appellees, is, that in the hands of the holders negotiating the bills, in each of those cases, the bills were accommodation papers, intended for the raising of money, vtpon which the antecedent parties were not liable until after negotiation. As is said in Powell v. Waters, 8 Cowen, 669, a bill or note, to be the subject of sale, must have had a pre-existing vitality. If it bad' not; if the holder negotiating it can not bring an action upon it in the event of its non-payment, and this is known to the party acquiring it from him, the transaction is of necessity a loan of money, and not a sale, and if the loan is usurious, the lender is not a bona fide holder. The principle is thus stated by Mr. Parsons: “ If no party to the note who is prior to the holder could himself bring an action upon it against the maker, then no prior party ever owned the note, and the holder, being the first owner, must be held to have loaned the money to the maker, through the prior parties, who were only agents of the maker; and on the other hand, if either prior party could have maintained an action, he owned the note and sold it to the holder.” — 2 Parsons on Bills, 426. The principle is stated in substantially the same language by Mr. Daniel in his work on “Negotiable Instruments” (1 Daniel’s Neg. Ins. § 751); and of itself forms tbe test by which a sale of a bill or note at a greater rate of premium than legal interest, is distinguished from a usurious loan of money. Williams v. Reynolds, 10 Md. 57; Durant v. Banta, 3 Dutch. (N. J. Law) 624; Gaul v. Willis, 26 Penn. St. 259; Saltmarsh v. P. & M. Bank, 17 Ala. 761. The instruction to the jury, that the plaintiff was not a bona, fide holder, because he acquired the hill from the payees, before maturity, at a greater rate of discount than eight per centum, was erroneous, and tbe exception to it was well taken.

Let the judgment be reversed and the cause remanded.